FBI agents arrested an Ernst & Young accountant Thursday on criminal charges of doctoring records and lying to authorities in connection with federal investigations of the failed Internet credit-card company NextCard Inc.

Prosecutors say they believe the case against Berkeley resident Thomas Trauger, 40, is the first time a professional has been charged with document destruction under last year's Sarbanes-Oxley Act, the sweeping reform legislation designed to curb corporate malfeasance after Enron and other scandals.

"Hopefully, the aggressive investigation and prosecution of this type of criminal conduct will deter others from engaging in this type of alleged conduct," said Ross Nadel, chief of the criminal division at the U.S. attorney's office in San Francisco.

FBI officials said Trauger was arrested at 9 a.m. in Pleasanton, but would not provide further details.

After the arrest, Trauger appeared before U.S. Magistrate James Larson in San Francisco and was released with the promise to appear at future proceedings or pay $1 million, Nadel said. He is scheduled to appear in court on Oct. 15 for an arraignment or preliminary hearing.

Trauger is accused of tampering with documents related to his audit of NextCard and its banking subsidiary, NextBank, after the company came under investigation by the Office of the Comptroller of Currency on Oct. 31, 2001. The Securities and Exchange Commission began a formal investigation into NextCard in September 2002.

"We allege the alterations deleted and toned down references to problems that the auditor should have given greater weight to," said Robert Mitchell, head of the enforcement program at the SEC's district office in San Francisco.

The alleged alterations in the comptroller's investigation were made between October 2001 and April 2002, according to the complaint, which was filed Wednesday in U.S. District Court in San Francisco but not released until after Trauger's arrest. They involve the company's financial statements for the year of 2000 and the first two quarters of 2001.

Authorities also charged Trauger with falsifying records based on information gathered by SEC investigators between January and April 2003. This charge falls under the Sarbanes-Oxley law, which was enacted in August 2002.

Ed Swanson, a San Francisco attorney who represents Trauger, said his client will plead not guilty to the charges. "He intends to fight the charges. Tom's a good man and respected accountant, and I am confident he will be exonerated," Swanson said.

NextCard, once a darling of the dot-com era, filed for bankruptcy in November 2002 and earlier this summer announced plans to liquidate its assets. The company, which had $464 million in outstanding claims, failed because it issued too many credit cards to delinquent borrowers and became buried in debt.

No NextCard or NextBank officials have been named in any of the accusations. The SEC investigation is continuing.

Also on Thursday, the SEC filed an administrative complaint against Michael Mullen, an audit manager at Ernst & Young who was fired by the firm on Thursday, and settled proceedings against Oliver Flanagan, a former senior manager who reported directly to Trauger in the San Francisco office. Mullen reported to Flanagan.

According to the complaint, the pair helped Trauger alter and destroy the documents.

Flanagan, 34, pleaded guilty on Aug. 14 to one count of obstructing the examination of a financial institution and cooperated with the U.S. attorney's office in his supervisor's investigation, according to his lawyer and federal investigators.

"Oliver has made his peace with our government," said his New York attorney, Stanley Arkin, adding his client has since returned to his native Ireland. "His only wish is that Mr. Trauger was a somewhat better mentor."

Mullen's attorney, Bob Breakstone of San Francisco, said that his 33-year- old client is sorry that he has been named in these proceedings but that he will continue to cooperate with the SEC. He said Mullen, of Seattle, could lose his authority to audit public companies if the government's case against him is successful.

Trauger could face a maximum of five years in prison and a $250,000 fine if convicted of obstructing the examination of a financial institution. If convicted of falsifying records in violation of Sarbanes-Oxley, he could earn up to 20 years in prison and another $250,000 fine.

Ernst & Young released a statement Thursday saying that it contacted federal authorities and launched an internal investigation when it became aware of the alleged violation. "We have provided the government with full and unfettered access to our people and records to assist in its own investigation of the matter," the statement said.

The firm fired Trauger in May of this year and put Mullen on administrative leave before firing him. Flanagan, who was working in Ernst & Young's Irish affiliate, has resigned.